The risk level of the portfolio was reduced last week due to the upcoming French election. The portfolio is now 30% in cash. The stock allocation is in defensive sectors (Utilities, Telecoms) or sectors that benefit from lower interest rates (Real Estate).

The French election is now front page news. This is positive, because it tends to mean that the market knows about the issue and it is already in the price.

On the other hand, problems for the market have in recent times started only after a change of government. This happened in Italy in 2018, in the UK in 2022, and in Mexico this month.

The French election is an unfortunate surprise because my thesis about European banks has hardly changed. I would still like to hold them. They remain cheap and the European economy is improving. But a self-preservation instinct kicks in when potentially major news affecting financial stability arrives. Banks are very risky companies and you do not want to be holding them into a crisis in which France’s ability to finance itself would be called into question. It is better take a small loss than see it balloon into something bigger.

The last time selling banks saved the portfolio from a major loss was in March 2023, during the Silicon Valley Bank crisis.

The French election may or may not turn out as severe as Silicon Valley Bank for the banks. It probably won’t be. But just in case it is, the plan is to continue to hold a reduced risk portfolio until the second half of July.

2024 performance
@triangulacapital +22.4%
$SWDA.L +11.1%

Portfolio changes
All European Financials were sold. The portfolio is now 30% in cash, 25% in telecoms, 20% in Utilities, 15% in real estate, and the rest in Consumer Staples and Brazil.